Laserfiche WebLink
CITY OF SAN LEANDRO <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />For The Year Ended June 30, 2015 <br /> <br /> <br />NOTE 14 – PENSION PLANS (Continued) <br /> <br />The long-term expected rate of return on pension plan investments was determined using a building-block <br />method in which best-estimate ranges of expected future real rates of return (expected returns, net of <br />pension plan investment expense and inflation) are developed for each major asset class. <br /> <br />In determining the long-term expected rate of return, CalPERS took into account both short-term and <br />long-term market return expectations as well as the expected pension fund cash flows. Using historical <br />returns of all the funds’ asset classes, expected compound returns were calculated over the short-term <br />(first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected <br />nominal returns for both short-term and long-term, the present value of benefits was calculated for each <br />fund. The expected rate of return was set by calculating the single equivalent expected return that arrived <br />at the same present value of benefits for cash flows as the one calculated using both short-term and long- <br />term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated <br />above and rounded down to the nearest one quarter of one percent. <br /> <br />The table below reflects the long-term expected real rate of return by asset class. The rate of return was <br />calculated using the capital market assumptions applied to determine the discount rate and asset <br />allocation. These rates of return are net of administrative expenses. <br /> <br />Asset Class <br />New <br />Strategic <br />Allocation <br />Real Return <br />Years 1 - 10(a) <br />Real Return <br />Years 11+(b) <br />Global Equity 47.0%5.25%5.71% <br />Global Fixed Income 19.0%0.99%2.43% <br />Inflation Sensitive 6.0%0.45%3.36% <br />Private Equity 12.0%6.83%6.95% <br />Real Estate 11.0%4.50%5.13% <br />Infrastructure and Forestland 3.0%4.50%5.09% <br />Liquidity 2.0%-0.55%-1.05% <br />Total 100% <br />(a) An expected inflation of 2.5% used for this period. <br />(b) An expected inflation of 3.0% used for this period. <br /> <br />73